distcheck problem

[ayaz . ali]

I am having a problem building my project with distcheck. Here is the
structure of my project:
There is a shared library built using Proj/src/Makefile.am and there is
a Dependent Utility that is built using Proj/util/Makefile.am.

In the util/Makefile.am I had specified:
INCLUDES=$(top_builddir)/include because my library installs headers in
include folder and library in lib. But i had to add $(top_srcdir)/src
because distcheck was complaining about the headers.

Similarly the util/Makefile had LDFLAGS to point to $(top_builddir)/lib
folder which gets created along with include when the library is
installed. The distcheck stops with following errors:
../libtool: line 1657: cd: ../lib: No such file or directory
libtool: link: cannot determine absolute directory name of `../lib'
make[3]: *** [util] Error 1

Does anyone have any idea how to solve this problem.